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Tuesday, 4 June 2013

Spend Analysis - It's Important to your Bottom Line

Spend Analysis is
a topic that is almost on every procurement professional's mind these
days and this is why organizations are dedicating more time and effort
to spend management, in which the spending patterns are identified and
the organizations can point out the bottlenecks and increase
opportunities for long-term savings.

However, organizations are
often intimidated as they all know it's not an easy task. It involves a
lot of data that may come from multiple sources, determining a
classification system and classifying each piece of data which is
usually linked to a financial transaction. But before even beginning to
decide where to extract the data from, you need to consider a few
factors such as what you are spending and where you're spending on and
this will actually be your starting point! Other key
metadata includes categories with the most suppliers and areas where an
organization is overpaying for goods or services, results in strategic
ways of cost savings, identifying new areas of opportunities, mitigating
supplier risks and identifying categories where purchasing should
consider getting into contracts. The benefits of adopting a
collaborative spend analysis doesn’t just happen, they all can only
begin after the organization's spend data is transformed into a
consistent, normalized format and put into a single database for
analysis.

Many companies out there today are routinely
performing spend analysis, but not taking full advantage of the output’s
potential. It's a strategic initiative for a procurement organizationand
can help reduce overall procurement spend. This initiative requires a
combination of technology and expertise and must be conducted as an
ongoing program to ensure the continuity of saving results.